


Harry Potter and the Magic of Options Trading

by supyonamesjosh



Category: Harry Potter - Fandom, Harry Potter - J. K. Rowling
Genre: Gen
Language: English
Status: Completed
Published: 2020-03-26
Updated: 2020-03-26
Packaged: 2021-03-01 03:21:28
Rating: General Audiences
Warnings: No Archive Warnings Apply
Chapters: 1
Words: 861
Publisher: archiveofourown.org
Story URL: https://archiveofourown.org/works/23328442
Author URL: https://archiveofourown.org/users/supyonamesjosh/pseuds/supyonamesjosh
Summary: Hermione convinces Harry he needs to do something more with the money sitting in his vault.
Comments: 1
Kudos: 1





	Harry Potter and the Magic of Options Trading

“Honestly Harry! You can’t just leave all of your money sitting in a vault doing nothing! There are financial steps you need to take to…”

Harry knew Hermione was right, but he had always been embarrassed that he knew so little about money while possessing so much of it. For most people, it was usually the other way around.

“...How do you think my parents afford to support me here?”

Harry was awakened from his thoughts by the sudden question posed to him. He never actually considered the matter and responded as such.

“Er… well your parents exchange money at Gringotts...”

“Of course but where does that money come from? You know how much it costs every year. I’ve seen you hemming and hawing before making purchases.” 

Harry was flustered at the question, which he obviously was unable to answer.

“Well why don’t you just tell me!” Harry shouted, quite exasperated at the direction of this conversation.

“Options trading!”

A long pause filled the air as Hermione smiled, waiting for recognition that never appeared on Harry’s face.

“...Excuse me?” Harry finally asked, inviting in the inevitable deluge of information which was sure to come.

“Oh Harry. I suppose I have to start at the beginning then. You do know how stocks work right?”

“Sure, like how much inventory a store has on hand.” Harry replied unsure how that was related to the current conversation.

The disappointment on Hermione’s face was palpable.

“No Harry. Ownership. Ownership in companies”

Harry figured the quickest way out of this conversation was going to be just to nod his head.

“Options trading is purchasing the opportunity to buy and sell stocks at some point in the future”  
Harry was glad he had already committed to nodding when he had no idea what was going on. He started to prepare for a vigorous neck workout. 

“So let’s take something you are familiar with. Suppose the Nimbus Racing Broom Company is going to announce a new product tomorrow and you think it is going to be great, how do you expect the price of the stock to react?”

Harry had a 50/50 chance with this one.

“...Well?” Harry Ventured.

“Right!” Hermione exclaimed, seemingly unaware that even half of babies would have correctly answered that question. 

“So you could purchase shares of NMBUS…” Hermione continued, enunciating the ticker symbol more out of self satisfaction that she knew it, than out of any sort of edification. 

“Or if you wanted a potentially bigger return you could just buy the opportunity to buy the stock.”

Harry was glad he always did neck stretches before Quidditch practice. 

“So the next day if the stock increases, you could potentially buy the company at the lower option price, or you could sell the opportunity you had purchased to someone else at a profit. Or you could….”

At this point Harry knew Hermione had to realize he was completely lost. He was bobbing his head as if a rock concert was bellowing from Hermione’s mouth.

“Does that make sense?”

Harry chose his words carefully.

“Why don’t you just tell me what you think I should do?”

Hermione thought for a moment. 

“Spells and Potions for Youth is a booming business. You should put all of your money in SPY Calls”

Hermione stifled a laugh. Harry was completely bamboozled. 

“... Muggle joke.” Hermione finally admitted.

“Ah” Harry replied. “So anyways…”

“Yes, what you should invest in” Hermione once again began to think. 

“What you should do is sell put options for companies you wouldn’t mind owning. What company do you want to own Harry?

Harry considered his choices. He liked brooms but wasn’t confident in any specific maker. “Eh, I’ve always liked Honeydukes. They always seem to have a crowd.”

Hermione smiled. “Then sell puts in Honeydukes.” 

Harry raised an eyebrow. “Sell?”

“This is how it works …” Hermione said as she rolled over a whiteboard that Harry swore didn’t exist a few minutes prior. She drew a line down the white board and began to jot. “Suppose the price of Honeydukes is currently 22G a share. You sell a 20G put option in Honeydukes for 100 Galleons that expires tomorrow. One of two things will happen when it expires tomorrow:  
A. Honedukes stock is higher than 20G. Nothing happens. You make 100 Galleons.”   
Hermione started writing on the other side of the board.  
“B. The stock is lower than 20G. You buy 100 shares of Honeydukes 20G each. You make 100 Gallons minus the difference in the stock price. So if it is higher than 19G you still made money.”

Harry looked up quizzically. “So it doesn’t have to even go up to make money?”

Hermione smiled. “No, and the worst thing that can happen is you own stock you wanted to buy anyways at a price lower than you were willing to pay for it.”

“This seems too good to be true. Why doesn’t everyone do this?” Harry asked.

Hermione gave a mischievous grin. “Not everyone is like me Harry. You know that. Let’s head over to a bank and set up an options account.”

Harry Potter then became even more fabulously wealthy.  
The End


End file.
